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Wednesday, February 12, 2014

NEPAL: 633,000 people to enter job market annually by 2020

In its Least Developed Counties Report 2013, UNCTAD argues that the number of young people of working age in Nepal is currently increasing by 550,000 a year (465,000 in 2005), and by 2020 it will climb to 633,000 a year. Globally, young population is projected to rise to 1.7 billion by 2050. By 2050, one in four young people worldwide will live in an LDC.

The report recommends improving GDP growth via:

the generation of employment, particularly work that pays a stable living wage and has safe employment conditions

investment to develop the capacities of economies to produce broader varieties of goods, and goods of greater sophistication and higher value

The report states that employment grew by 2.7% per annum during 2000-2012, higher than the average population growth of 1.7% but below GDP growth of 4%.

Sector-wise employment breakdown shows the following:

Agriculture accounted for 71% of total employment, down from 75% in 2000.

Industry accounted for 12% of Nepal's total employment in 2013, up by 2% compared to 2000.

Services accounted for 17% of employment in 2013, up by 2% compared to 2000.

The figure below shows LDC’s employment elasticity to GDP growth. Nepal has elasticity below 1, which suggests that employment growth is dominated more by labor productivity growth than broad-based employment generation. Elasticity greater than 1 indicates that employment grows in more proportion than GDP growth. Employment elasticity to GDP growth in LDCs is found to average 0.7.

It seems growth in per capita GDP is accounted more for by the change in share of working age population (demographic structure) in Nepal and less by output per worker. Other developing countries have seen growth in per capita GDP coming more from productivity growth (output per worker). In Nepal, demographic transition (alternatively, decreasing dependent population) generated per capita growth equivalent to 42.8% of the actual observed growth in per capita GDP.

Furthermore, rather than within sector productivity growth, contributions to growth in per captia GDP came more from inter-sectoral shifts (structural change) in Nepal, especially from a shift to service sector. Exogenously, about 42.8% contributions came from demographic shifts. These are pretty unique to Nepal when compared to other LDCs, where growth in per capita GDP is driven largely by productivity growth within sector, i.e. moving from lower productivity to higher productivity activities within sectors (and then across sectors).

For more on Nepal's structural transformation, see this blog post and the links within.

About

Formerly, economics officer at Asian Development Bank, Nepal Resident Mission. Worked as a researcher at SAWTEE, Kathmandu. Also, worked as a consultant for Ministry of Commerce & Supplies, Government of Nepal; FAO; UNDP, GIZ-CIM, and ADB among others. I was an op-ed columnist for Republica between December 2008 – June 2012. I also worked as a Junior Fellow for Trade, Equity & Development program at Carnegie Endowment for International Peace, Washington, D.C .